M/S.mardia Sons Holding Private Ltd.,A Private Limited Company,Incorporated Under The Provisions Of Theindian Companies Act, 1956 v. The Deputy Commissioner Of Income Tax Company Circle Iv (1)

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR. JUSTICE S.M.SUBRAMANIAMW.P.Nos.8171 of 2013 & 30659 of 2014 andM.P.No.1 of 2014 W.P.No.8171 of 2013 M/s.Mardia Sons Holding Private Ltd.,A Private Limited Company,Incorporated under the Provisions of theIndian Companies Act, 1956,Represented by its Director,Mr.Bharat Kumar Mardia,No.5 Damodar Street,1[st] Floor, Kellys,Chennai-600 010. .. Petitioner vs. 1.The Deputy Commissioner of Income Tax Company Circle IV (1), 121, Mahatma Gandhi Road, Nungambakkam, Chennai-600 034. 2.The Assistant Commissioner of Income Tax Company Circle IV (1), 121, Mahatma Gandhi Road, Nungambakkam, Chennai-600 034... Respondents PRAYER : Writ Petition is filed under Article 226 of theConstitution of India, praying for the issuance of a Writ ofCertiorari, calling for the records on the file of the firstrespondent and quash the impugned notice issued by the secondrespondent under Section 148 of the Act in PAN No.AAACM6235Gdated 23.02.2012 and consequentially quash the Assessment Orderfor A.Y. 2007-2008 in dated 01.03.2013 issued by the firstrespondent. W.P.No.30659 of 2014 M/s.Mardia Sons Holding Private Ltd.,A Private Limited Company,Incorporated under the Provisions of theIndian Companies Act, 1956,Represented by its Director,Mr.Bharat Kumar Mardia,No.5 Damodar Street,1[st] Floor, Kellys,Chennai-600 010. .. Petitioner vs. The Deputy Commissioner of Income Tax Company Circle IV (1),121, Mahatma Gandhi Road,Nungambakkam,Chennai-600 034. .. Respondent PRAYER : Writ Petition is filed under Article 226 of theConstitution of India, praying for the issuance of a Writ ofCertiorari, calling for the records on the file of therespondent in PAN dated 24.10.2014 relating to theAssessment Year 2007-08, quash the same. For Petitioner : Mr.Veerabathiran Prasanth for Mr.R.Sivaraman[in both W.Ps] For Respondents : Ms.Hema Muralikrishnan, Senior Standing Counsel [For Income Tax][in both W.Ps] COMMON ORDER The writ petition in W.P.No.8171 of 2013 is filed,challenging the notice issued by the second respondent underSection 148 of the Income Tax Act, 1961 (hereinafter referred toas the 'Act', in short) dated 22.03.2012 and the consequentialassessment order for the assessment year 2007-2008 in orderdated 01.03.2013. https://hcservices.ecourts.gov.in/hcservices/ 2. The petitioner is a domestic Private LimitedCompany under the assessment of income tax in the file of therespondents. For the assessment year 2007-2008, the petitionerfiled its return of income on 22.10.2007, claiming depreciationunder Section 32 of the Act, for Rs.2,20,97,892/- at the rate of60% on computers and its accessories, which had been given onlease that year. The case was selected for scrutiny andassessment was completed under Section 143(3) of the Act on29.12.2009, allowing the entire claim of depreciation. Underthese circumstances, the impugned notice dated 23.02.2012 wasissued under Section 148 of the Act for reopening of assessment.Thus, the petitioner is constrained to move the present writpetition. 3. The learned counsel, appearing on behalf of thepetitioner, mainly contended that the reasons for reopening ofthe assessment is absurd and not in consonance with theprovisions of the Income Tax Act, 1961. There is no new materialavailable on record to establish for the purpose of reopening ofassessment and in fact, the reasons assigned in the impugnedorders were already adjudicated by the Assessing Officer and afinding was also made. 3. The learned counsel, appearing on behalf of thepetitioner, mainly contended that the reasons for reopening ofthe assessment is absurd and not in consonance with theprovisions of the Income Tax Act, 1961. There is no new materialavailable on record to establish for the purpose of reopening ofassessment and in fact, the reasons assigned in the impugnedorders were already adjudicated by the Assessing Officer and afinding was also made. 4. Thus, initiation of proceedings under Section 147of the Act, is nothing but change of opinion and cannot beconstrued as reason to believe. In this regard, the learnedcounsel for the petitioner solicited the attention of this Courtwith reference to the assessment order passed under Section 143(3) of the Income Tax Act on 29.12.2009 with reference toassessment order for the assessment year 2007-2008. 5. The reasons cited and the income escaped as allegedwere already brought to the notice of the Assessing Officer atthe time of original assessment and therefore, there is nochange of circumstances nor any new material available on recordfor the authorities to invoke Section 147 of the Act. 6. The learned counsel for the petitioner, citing thereasons for reopening of assessment year 2007-2008, furnished bythe respondent in proceedings dated 09.05.2012, contended thatthe petitioner raised specific objections for reopening of theassessment. 7. The petitioner, in his objections, has stated that“we would like to submit that the reopening of assessmentproceedings under Section 148 of the Act is null and void andwithout jurisdiction and further, we would like to bring to yournotice that during the course of assessment proceedings, theAssessing Officer has specifically called for the details inthis regard vide notice under Section 142(1) of the Income Tax https://hcservices.ecourts.gov.in/hcservices/ Act, 1961 on 17.09.2009 vide Serial Nos.1, 11 and 14 asreproduced.” 8. Relying on the objections, the learned counsel forthe petitioner is of the opinion that the impugned order isnothing but change of opinion and there is no reason to believe,which is mandatory under the provisions of the Act. 9. The learned counsel for the petitioner relied onthe judgment of the Supreme Court India in the case ofIndustrial Credit and Development Syndicate Limted vs.Commissioner of Income Tax, Mysore and Another [(2013) 350 ITR527 (SC)], it has been held in paragraph-13, which reads asunder:- “13. The Revenue attacked both legs ofthis portion of the section by contending: (i) that the assessee is not the owner ofthe vehicles in question, and (ii) that the assessee did not use thesetrucks in the course of its business. It was argued that depreciation can beclaimed by an assessee only in a case wherethe assessee is both, the owner and user ofthe asset.” 10. However, the reasons for reopening furnished bythe respondents in proceedings dated 09.05.2012 reads as under:- “During the year assessee has enteredinto a tripartite lease agreement withM/s.NLC Ltd (lessee) and M/s.CCS InfotechLtd (vendor) for the purchase of computersystem. As per the lease agreement, theassessee has offered to pay acquisitioncost of purchase of the equipment. However,the purchase order has been placed by thelessee directly to the vendor. Also theagreement states that M/s.NLC Ltd willavail income tax depreciation. However,assessee has claimed depreciation inrespect of computers for a sum ofRs.2,20,97,982/-. As per the leaseagreement the assessee is mere financingagent whereby the assessee have onlyprovided funds for the acquisition of theasset. Hence, the depreciation on thecomputers cannot be allowed in the hands ofthe assessee.” 11. The assessee, vide reply dated 09.11.2012, hasstated that the reopen of assessment proceedings under Section148 is null and void and without jurisdiction and further, it iscontended that it amounts to change of opinion and therefore,the writ petition is to be allowed. However, the authoritiesfound that the depreciation on the computers cannot be allowedin the hands of the assessee and therefore, the said aspect isto be considered only by reopening of the assessment. 12. The facts regarding the lease agreement would havebeen placed before the Assessing Officer during the originalassessment. However, the other factors regarding depreciation oncomputers and related factors were not adjudicated during theoriginal assessment and thus, there is a reason to believe forreopening of assessment. However, the fact remains thatassessment order has already been passed in order dated24.10.2014 and the petitioner filed another Writ Petition inW.P.No.30659 of 2014, challenging the assessment order. 13. Under these circumstances, this Court is of theconsidered opinion that the reasons given provided a cause forreopening of the assessment and such reasons are sufficient tosatisfy the requirement of reason to believe for reopening ofassessment under Section 147 of the Income Tax Act and thus,there is no infirmity. Accordingly, Writ Petition in W.P.No.8171of 2013 is liable to be dismissed. 14. As far as the Writ Petition in W.P.No.30659 of 2014is concerned, the assessment order passed for the AssessmentYear 2007-08, in order dated 24.10.2014 is under challenge inthis writ petition. The first writ petition in W.P.No.8171 of2013 was filed, challenging the initiation of proceedings underSection 147 of the Act and the notice issued under Section 148of the Act. Meanwhile, the respondent passed the assessmentorder for the Assessment Year 2007-08 in proceedings dated24.10.2014 and therefore, the petitioner is constrained to filethe second writ petition in W.P.No.30659 of 2014. In this writpetition, the petitioner mainly raised the ground of limitation.It is contended that the interim stay granted in W.P.No.8171 of2013 expired automatically, in view of the fact that the HighCourt has not extended the interim stay granted. Relying onExplanation 1 to Section 153, the learned counsel for thepetitioner contended that the assessment order was passed beyondthe period of limitation as contemplated under Section 153 ofExplanation 1 to the Act and therefore, the same is liable to beset aside on the ground of limitation. Relying on the fact thatthe interim stay granted by this Court expired, the period oflimitation is to be reckoned from the date of expiry of the stayand therefore, the assessment order was issued beyond the period of limitation and thus, the writ petition is to be allowed. Thetime limit prescribed under Proviso to Section 153(2) to pass anorder of reassessment within a period of 60 days expired andthus, the reassessment order passed under Section 143(3) readwith Section 147 of the Income Tax Act in proceedings dated24.10.2014 is non-est in law and liable to be quashed. 15. With reference to the reckoning period oflimitation in cases where the stay granted and expiredautomatically, in view of the fact that it was not extended,this Court has decided the principles in WP Nos.3005 of 2013 and28434 of 2014 dated 23.04.2021 and the relevant paragraphs areextracted hereunder:- of limitation and thus, the writ petition is to be allowed. Thetime limit prescribed under Proviso to Section 153(2) to pass anorder of reassessment within a period of 60 days expired andthus, the reassessment order passed under Section 143(3) readwith Section 147 of the Income Tax Act in proceedings dated24.10.2014 is non-est in law and liable to be quashed. 15. With reference to the reckoning period oflimitation in cases where the stay granted and expiredautomatically, in view of the fact that it was not extended,this Court has decided the principles in WP Nos.3005 of 2013 and28434 of 2014 dated 23.04.2021 and the relevant paragraphs areextracted hereunder:- “18. As far as W.P.No.28434 of 2014 isconcerned, the learned counsel for thepetitioner mainly raised the ground oflimitation. It is contended that theinterim stay granted in W.P.No.3005 of 2013expiredautomaticallyon08.06.2014.Relying on Explanation 1 to Section 153, thelearned counsel for the petitioner contendedthat the assessment order was passed beyondthe period of limitation as contemplatedunder Section 153 of Explanation 1 to theAct and therefore, the same is to be setaside on the ground of limitation. It iscontended that the interim stay granted bythe High Court on 06.02.2013 was extendedtill 08.06.2014. On 08.06.2014, the staygranted by the High Court was not extendedand expired. Thereafter, on 04.07.2014,W.P.No.3005 of 2013 was dismissed. Thus,the time limit prescribed under proviso toSection 153(2) to pass an order ofreassessment expired (60 days from08.06.2014 as per Explanation 1 to Section153(2)). Thus, the reassessment orderpassed under Section 143(3) read withSection 147 in proceedings dated 24.10.2014is non est in law and liable to be quashed.19. The learned counsel appearing onbehalf of the writ petitioner mainlycontended that the issue has been consideredby the Allahabad High Court in the case ofCommissioner of Income Tax, Agra vs. ChandraBhan Bansal reported in (2014) 46taxmann.com 108 (All) wherein, a finding wasmade that in such circumstances where theinterim order was not extended, then theperiod of limitation expired and the order of reassessment is to be set aside. Para 10of the judgment, which is relevant, standsextracted hereunder:-“10.The above statutory scheme clearlyindicates that for computing the period oflimitation the period during which theassessment proceedings is stayed shall beexcluded. In excluding the above period, theconcept of communication of the order of theCourt cannot be imported. The exclusion ofthe period has been provided because of stayor injunction by any Court during which theassessment proceedings are stayed. Theintention is clear that when the limitationfor assessment has started it can be stayedonly by an order or injunction of any Courtand as soon as the order or injunction ofthe Court is vacated, the period oflimitation shall re-start since after thevacation of the order of the Court, there isno embargo on the authorities to proceedwith the assessment. The submission of ShriShambhu Chopra learned counsel appearing forthe Revenue that the limitation will startagain only when the order is communicated tothe Department thus cannot be accepted. Theother reason for not accepting the abovesubmissionisalsoequallypotent.Explanation 1 (v) and (vi) to Section 153 ofthe Act, 1961 are also part of the samestatutory scheme. In Explanation 1 (v) and(vi) to Section 153 of the Act, 1961 thestatutory scheme provides for computing theperiod of limitation from the date when theorder under sub-section (1) of Section 245Dand 245Q is received by the Commissioner.Thus, the legislature has provided forexcluding the period from the date ofcommunication of the order where they sointended.Theuseofconceptofcommunication of receiving the order in thesame provision which is absent inExplanation 1 (ii) concerned clearlyindicates that for the purposes ofExplanation 1 (ii), the communication of theorder of the Court vacating the stay orderor injunction is not contemplated.” 20. In yet another case in CIT vs. Drs.X-Ray & Pathology Institute (P.) Ltd.reported in (2013) 385 ITR 27 (All), the Allahabad High Court held as follows:-“In the present case, the stay wasvacated by the High Court on August 26,2009. The Assessing Officer took the date ofvacation of the interim order to be thedate, when it was received by him onNovember 9, 2009, and passed the assessmentorder on June 22, 2010, which was clearlybeyond two years as limitation would restartfrom August 26, 2009, and ended on April 15,2010. Allahabad High Court held as follows:-“In the present case, the stay wasvacated by the High Court on August 26,2009. The Assessing Officer took the date ofvacation of the interim order to be thedate, when it was received by him onNovember 9, 2009, and passed the assessmentorder on June 22, 2010, which was clearlybeyond two years as limitation would restartfrom August 26, 2009, and ended on April 15,2010. Apart from the fact that the AssessingOfficer had sufficient time the Tribunal hasheld that there is no procedure in the HighCourt to communicate the order to the partyto make it effective. The provisions of theincome tax Act for filing of the appeal fromthe date of service of the order will not beattracted to calculate the period oflimitation to complete the assessment.In the present case, we are notconcerned with limitation for any particularact to be performed, but the arrest of thelimitation by an interim order passed by theHigh Court. As soon as the order wasvacated, the limitation will restart andwill exhaust itself on the period oflimitation provided under the Act.” 21. The learned counsel for thepetitioner also relied upon the decision ofthe Delhi High Court in the case of SahebRam Om Prakash Marketing Pvt Ltd., vsCommissioner Of Income Tax & Ors., reportedin 398 ITR 292. The relevant paragraphs arehereunder:-“12. In the counter-affidavit the standtaken by the Revenue is that the order ofthis Court dated 9th November 2016dismissing the Assessee's writ petition W.P.(C) No. 1738 of 2013 was received in theoffice of Principal CIT-8 only on 2ndDecember 2016. Thereafter notice was issuedto the Assessee on 6th December 2016 underSection 142(1) of the Act. Within 60 days ofthe date of the receipt of the order of theHigh Court, the impugned assessment orderunder Section 147 read with Section 143 (3)of the Act was passed on 30th January 2017.It is accordingly submitted that theassessment order was not issued beyond the period stipulated under Section 153 (2) ofthe Act read with the proviso to Explanation1 thereof.13. ............14. ............15. ............16. On the other hand, Mr. RahulKaushik, learned Senior Standing Counselappearing for the Revenue, relied on thedecision of the Calcutta High Court in IndiaFerro Alloy Industry Pvt. Ltd. v.Commissioner of Income-Tax [1993] 202 ITR671 (Cal) and of the Madras High Court inThanthi Trust v. Income Tax Officer [1989]177 ITR 307 (Mad) and urged that the periodof limitation of one year in terms ofSection 153 (2) of the Act should bereckoned only after the vacation of the stayby this Court, in which case the impugnedorder of assessment would be within time. Hesubmitted alternatively that, in terms ofthe first proviso to Explanation 1 toSection 153 of the Act, the period oflimitation got extended by 60 days from 2ndDecember, 2016, i.e. the date of receipt bythe Revenue of the certified copy of theorder of this Court.17. ..........18. In any event, clause (ii) toExplanation 1 only excludes from thecomputation of limitation "the period duringwhich the assessment proceeding is stayed byan order or an injunction of any court." Itdoes not exclude the period between the dateof the order of vacation of stay by theCourt and the date of receipt of such orderby the Department. Therefore, in the presentcase, the Revenue cannot take advantage ofthe fact that it received a copy of theorder dated 9th November 2016 of this Courtonly on 2nd December 2016.”22. Relying on the said decisions, thelearnedcounselforthepetitionerreiterated that in the present case, it isan admitted fact that the order ofreassessment was passed after the period ofexpiry and thus, it is untenable and liableto be set aside, in view of the limitationclause contemplated under Section 153(2).23. The admitted facts are that the writ petition in W.P.No.3005 of 2013 was filed bythe petitioner on 14.02.2013 challenging theproceedings dated 11.01.2013 issued underSection 148 of the IT Act with reference tothe assessment year 2007-08. The High Courtadmitted the writ petition and grantedinterim stay of all further proceedings forthe assessment year 2007-08 on 06.02.2013.Normal limitation under Section 153(2) topass reassessment order ended on 31.03.2013.Difference between the above two dates isonly 53 days. In this context, it iscontended that interim stay granted on06.02.2013extendedtill08.04.2014thereafter, the interim stay was notextended and expired on 08.06.2014 andW.P.No.3005 of 2013 was dismissed on04.07.2014. 24. The learned counsel for thepetitioner is of an opinion that once thestay expired automatically, then thelimitation should be reckoned from the dateof expiry of the stay and not from the dateof communication of the final order passedin a writ petition as contended by therespondent. The respondent relied on thefinal order passed in the writ petition on04.07.2014. Thus, the very interpretationregarding the period of limitation asexplained by the respondent in their orderis untenable. 25. This Court is of the consideredopinion that a pragmatic approach isrequired in such circumstances and thesituations prevailing in the High Courts areto be considered. High Court cannot closeits eyes in respect of the happenings andthe situation prevailing in the matter ofdealing with litigations and on hyper-technical grounds, the liability or theopportunity cannot be dispensed with. Evenin such circumstances, the law of limitationis to be interpreted in a constructivemanner so as to ensure that the purpose andobject of the provisions are dealt with inaccordance with the objects and reasons ofthe Act. 26. Undoubtedly, as rightly pointed out,if the date of expiry of the interim stay istaken into consideration, the petitioner may 26. Undoubtedly, as rightly pointed out,if the date of expiry of the interim stay istaken into consideration, the petitioner may be correct, as the period of limitationcontemplated expired. However, the factremains that the interim order grantedinitially on 06.02.2013, which was extendedup to 08.06.2014 was neither extended norvacated by the High Court subsequently.Admittedly, the High Court has not passedany orders either vacating the stay orextending the stay. Thus, no order has beenpassed on the date of expiry. In practice,the cases are not listed on the date ofexpiry of interim order in all circumstancesby the Registry of High Court, for which thelitigants should not made to suffer. Inmost of the writ petitions, even after theexpiry of interim orders, the cases are notlisted for various reasons. It is apractical difficulty being faced by the HighCourts across the country, as large numberof litigations are pending. When the casesare not listed on a particular day morespecifically on the day of expiry of aninterim order, then the parties cannot bepenalised or blamed for non-listing of thematter for hearing, nor parties should madeto suffer for the practical difficultiesbeing faced by Courts. In this context, itis to be construed that in the absence ofany order passed by the High Court eithervacating the interim order or extending theorder, it is to be construed that the sameposition as on 08.04.2014 shall continue forall purposes and the assessee cannot takeundue advantages of the situation for thepurpose of seeking exoneration from theclutchesoftheproceedingsmorespecifically, under the IT Act. Such hyper-technical grounds raised cannot be a reasonfor granting exoneration. The departmentadmittedly had not received any orders fromthe High Court. The only contention is thatthe counsels were aware of such orders.Even in such circumstances in the absence ofany order communicated, it may not bepossible for the Income Tax Department toact in a particular manner. In the event ofno order, the Department has to wait for theorders to be received and cannot presume orassume certain implications and take adecision. Thus, the Income Tax Department has rightly acted upon based on the finalorder passed in the writ petition and theautomatic expiry theory as contemplated bythe petitioner cannot be taken intoconsideration for the purpose of reckoningthe period of limitation with reference tothe provisions of the IT Act. This apart,W.P.No.3005 of 2013 was dismissed on merits.Thus, no further adjudication on merits isrequired in respect of the present writpetition, as the present writ petition hasbeen filed challenging the proceedings dated24.10.2014, which is the reassessment orderpassed by the competent authority. 27. Accordingly, W.P.No.28434 of 2014stands dismissed. The petitioner is atliberty to file a statutory appeal and raiseall the grounds raised in this writ petitionbefore the appellate authority for thepurpose of redressing their grievances inthe manner known to law. In the event offiling any such statutory appeal, theappellate authority is bound to consider thesame on merits and in accordance with law byaffording opportunity to the petitioner. 28. With the above observations, boththe writ petitions in W.P.Nos.3005 of 2013and 28434 of 2014 stand dismissed. No cost.Consequently,connectedmiscellaneouspetition is closed.”16. In view of the findings in the order passed inWP Nos.3005 of 2013 and 28434 of 2014 dated 23.04.2021, the caseof the petitioner deserves no merit consideration as thepetitioner has to avail the appellate remedy against theassessment order passed by the Competent Authority and thepetitioner is at liberty to do so. 17. Accordingly, the writ petitions in W.P.No.8171 of 2013 andW.P.No.30659 of 2014 are dismissed. However, there shall be noorder as to costs. Consequently, connected miscellaneouspetition is closed. Sd/-Assistant Registrar(CS-VI) //True copy// Svn/Kak Sub Assistant Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1.The Deputy Commissioner of Income Tax Company Circle IV (1), 121, Mahatma Gandhi Road, Nungambakkam, Chennai-600 034. 2.The Assistant Commissioner of Income Tax Company Circle IV (1), 121, Mahatma Gandhi Road, Nungambakkam,Chennai-600 034. +1cc to Ms.Hema Muralikrishnan, Advocate SR.No.25139 WP Nos.8171 of 2013& 30659 of 2014 KV(CO)GMY(08/07/2021)